As a privately held company, Chrysler doesn't have to tell anyone anything. But in an enterprise as vast and well-charted as the American automobile industry, you can run, but you can't hide from market reality. Automotive News [AN sub] raises an interesting question: why is "fast moving" ChryCo asking its dealers to pre-order products five months in advance? In a July 3 memo to store owners, Chrysler claimed demand for its Belvidere-built products had 'skyrocketed.' Really? While Patriot sales were up 5.5 percent in June, Caliber sales tumbled by 43.6 percent, and the Compass crashed 38.8 percent. Apparently, "Chrysler is taking aggressive actions to realign our product volumes to coincide with market demand." Really? Chrysler killed Belvidere's third shift in March; it's currently running on two shifts with overtime. Would orders in hand inflate Chrysler's worth to a potential buyer? Anyway, buried in the article: an assertion [by AN] that "Chrysler is trying to stick to its guns on slashing unprofitable fleet sales." According to ChryCo, they've cut fleet sales by 20 percent. In truth, even the rental fleets don't want the cliff face depreciation cars, SUVs, minivans and pickups (despite a recently revealed, post spin-off, long term contract with Thrifty). And the automaker's retail/fleet mix is getting worse, not better. AN reckons fleet sales account for about 35 percent of Chrysler's total– not including dealer fleet sales.
Find Reviews by Make:
Read all comments
An article in the WSJ today cites a tougher climate for dealers. Does anyone know what happens when a dealer calls it quits. Can’t sell the franchise; just closes down. Does the dealer get any money from the manufacturer for relinquishing the franchise? Some of the stuff I’ve read in AN leads me to think they do.
Yes fleet sales have been slashed, but retail sales have also fallen. So of course the percent mix of fleet v. retail is not going to improve.
mel23:
Depends on the circumstances.
If the dealer simply takes a dirt nap…then no. The finance guys repo the cars, and the game is over.
However, a common scenario is for the mfg to work with the dealer to sell the franchise to a competing dealer to get the Buyer “on channel” (DJC all under one roof in a fancy, exclusive, CLLC-designed building). In these cases, the mfg often contributes some sum of money to help motivate the parties. That amount depends on various factors, including the size of the market, how much the mfg likes the Buyer/Seller, etc.
obviously sounds like chrysler is trying to channel-stuff.
channel-stuffing + flaming cash-burn-rate + banks hesitant to loan uncommitted money = company desperate to hoard cash prior to chap 11? (or at the very least Cerberus sees conditions getting even worse even if Chrys avoids chap 11)
obviously sounds like chrysler is trying to channel-stuff.
Actually, it sounds like the opposite. They are taking pre-orders because they want to manage their production and not end up with more excess inventories than they bargained for.
As for cutting fleet sales, it seems to me that Wall Street has missed the point. Fleet sales are ultimately determined by the marketplace, not by the automakers. They are a reactive measure, not a proactive one.
If the automakers can’t or won’t make vehicles that consumers want, the car companies have two choices: Let them rust or sell them to fleets. So of course they end up in fleets, and the fleet percentage ends up being high.
The way to cut fleet sales is not to announce to the press that fleet sales are being cut, but by making cars that people want. If retail customers will buy them, there won’t be much left over for the fleets.
Under Cerberus, Chrysler has failed to deliver compelling products. Without compelling products, you don’t have retail customers. Without retail customers, you have fleet sales.
If you want to end fleet sales, make a fantastic small car and compact sedan that makes folks think twice about buying another Civic or Camry. Just drive Chrysler’s versions of these cars, and it’s really obvious why they end up in fleets.
I agree with Pch101, but would add that all of Chrysler’s present vehicles were designed and engineered during the “Dr. Z” Daimler-Chrsyler era.
Remember those corny Dr. Z ads about the German Engineering baked into Chrysler products? Ugh.
If you are a Chrysler/Dodge/Jeep dealer, what cars would you actually order for 5 months out, that you don’t already have plenty of already?
Jeep Unlimited, Challenger, maybe a few of the ’09 Rams, but what else? Name the Chrysler product that is in such high demand that you want to ensure you have enough supply 5 months from now.
This is a problem that 0% financing and $2.99 gas just can’t solve.
Chrysler Belvedere? Isn’t that a 1950’s product??? I don’t follow their products at all so somebody clue me in…
Busbodger,
Belvedere is the name of a manufacturing plant.
And an excellent Vodka, by coincidence.
(DJC all under one roof in a fancy, exclusive, CLLC-designed building).
DJC = Dodge, Jeep, Chysler. Right?
What does CLLC stand for?
I think it stands for Chrysler LLC (Limited Liability Corporation)